Abstract
During recent decades, culture is gaining more and more attention as a factor that determines economic outcomes. Trying to investigate its role on innovation and economic development, this paper uses a dataset that offers the potential for a cross-sectional and time series analysis. Thus, in this paper, the effects of culture on innovation (as measured by patent applications, spending on R&D, number or researchers per 1000 individuals and number of government researchers) and economic development are investigated. Cultural background is captured through the Schwartz’s cultural values, as reported through the European Social Survey (ESS) waves during the period 2002–2018. The dataset is comprised by 18 Eurozone countries. Using principal component analyses to capture the Schwartz’s cultural values, as well as two ways fixed-effects analysis (FE), time dummies for each ESS wave included in the analysis and cluster—robust estimates of the standard errors, in order to examine the above relationships, the main conclusions derived from the analysis are that (a) there is significant effect of culture on innovation and economic development, and (b) the main cultural dimensions that hinder innovation and economic development are the prevalence of hierarchy, affective autonomy, and mastery. These results hold for all different dependent variables used in the analysis. Thus, when hierarchy, affective autonomy, and mastery are present innovation and economic development are hindered, leading to obstacles regarding the sustainability of economic outcomes. The opposite holds in societies where embeddedness, egalitarianism, and harmony prevail.
Highlights
The cultural background and the values of which it is composed interact in a complex way with the economic system
principal component analyses (PCA) offers the opportunity to reduce the number of the variables, creating principal components that are characterized based on the specific values that configure them out
The questions used in the analysis present high correlation between each other, something that allows for using PCA in order to capture the overall culture measure and the Schwartz’s cultural values
Summary
The cultural background and the values of which it is composed interact in a complex way with the economic system. ESS waves are offered for a panel data analysis since the waves are released every 2 years, while other similar studies such as the World Values Survey and the European Values Study release their waves more slowly (every 3–5 years) This is the first time, cultural background is used to determine innovation output and economic development using such time-densely data, since most studies use culture as a constant structure. According to them human values are a critical element in order to explain different behaviors among individuals and societies and may be considered as the beliefs of the society and what motivates human action In their analysis, they end up in 10 broad values which concern the whole world since these are based in specific requirements of social existence. PCA offers the opportunity to reduce the number of the variables, creating principal components that are characterized based on the specific values that configure them out
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